EXPLANATORY STATEMENT
Issued by authority of the Treasurer/Assistant Treasurer/Minister for Financial Services and SuperannuationFederal Financial Relations ACt 2009
Federal Financial Relations (General Purpose Financial Assistance) No. 77 (August 2015)
The Intergovernmental Agreement on Federal Financial Relations (the IGA) provides a robust foundation for collaboration on policy development and service delivery, and facilitates the implementation of economic and social reforms in areas of national importance.
In agreeing the new framework for federal financial relations, the Commonwealth committed to the provision of on‑going financial support for the States’ service delivery efforts through:
• general purpose financial assistance, including the on‑going provision of GST payments, to be used by the States for any purpose;
• National Specific Purpose Payments to be spent in the key service delivery sectors; and
• National Partnership payments to support the delivery of specified outputs or projects, to facilitate reforms or to reward those jurisdictions that deliver on nationally significant reforms.
The new federal financial framework commenced on 1 January 2009. The payment provisions of the Intergovernmental Agreement are implemented through the Federal Financial Relations Act 2009.
General purpose financial assistance
The Federal Financial Relations Act 2009 provides for the Minister to credit amounts to the COAG Reform Fund for the purpose of providing general purpose financial assistance to the States in the form of general revenue assistance other than GST revenue grants.
• The COAG Reform Fund Act 2008 established the COAG Reform Fund and specifies that it is a Special Account for the purposes of the Financial Management and Accountability Act 1997.
To improve transparency, the Minister’s determinations in respect of general purpose financial assistance are legislative instruments and will be registered on the Federal Register of Legislative Instruments, but will not be disallowable.
• This clarifies that determinations made by the Minister under subsection 9(1) would not otherwise be legislative instruments within the meaning of section 5 of the Legislative Instruments Act 2003.
• The Minister has an obligation under the IGA to make payments of general purpose financial assistance in a prescribed manner. Exemption from the disallowance provisions will allow the Minister to meet this obligation.
Consultation
The IGA was subject to extensive consultation with the States and was signed by all jurisdictions in December 2008. The IGA is publicly available on the Ministerial Council for Federal Financial Relations website. There is also extensive ongoing consultation with the States on general revenue assistance arrangements.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
It is difficult to assess the human rights compatibility of either the determination or the making of General purpose financial assistance payments, as the amounts paid to each state can be used for any purpose. Generally, payments such as these will promote multiple human rights by facilitating the provision of additional funding to the States, which will invariably support service delivery in a range of areas at the discretion of each State. As such, neither this determination nor the making of General purpose financial assistance payments could be said to have a detrimental impact on any human rights.
Commencement
The determination commences on the day it was made.
Overview
The Federal Financial Relations Act 2009 was enacted by the Parliament of Australia to implement the provisions of the Intergovernmental Agreement on Federal Financial Relations (IGA) concerning federal financial support to the states. This legislation addresses the need for a structured and transparent framework to provide financial assistance to the states for their service delivery efforts. The Act ensures that the Commonwealth's commitment to ongoing financial support is carried out effectively through general purpose financial assistance, National Specific Purpose Payments, and National Partnership payments, all of which aim to facilitate economic and social reforms in areas of national importance. The Act also mandates that the Minister's determinations regarding general purpose financial assistance are legislative instruments and are registered on the Federal Register of Legislative Instruments, enhancing transparency. The policy objective of the Act is to foster better collaboration and service delivery between the Commonwealth and the states, while ensuring compliance with the obligations set out in the IGA.
Scope and Application
The Federal Financial Relations Act 2009 applies to the Commonwealth of Australia and the states and territories, facilitating the implementation of the Intergovernmental Agreement on Federal Financial Relations (IGA) through the provision of financial assistance to the states. This assistance includes general purpose financial assistance, National Specific Purpose Payments, and National Partnership payments, all aimed at supporting states in their service delivery efforts and enabling economic and social reforms. The Minister for Financial Services and Superannuation is responsible for crediting amounts to the COAG Reform Fund for the purpose of providing these financial supports. Determinations regarding general purpose financial assistance made by the Minister are legislative instruments and are registered on the Federal Register of Legislative Instruments, although they are exempt from disallowance provisions to ensure compliance with the IGA obligations. The Act does not specify exclusions or thresholds but instead relies on the terms of the IGA and subordinate instruments to define the specifics of financial assistance.
Key Provisions
The Federal Financial Relations Act 2009 (section 9) outlines the main provisions for the Minister to credit amounts to the COAG Reform Fund for the purpose of providing general purpose financial assistance to the States. This assistance, which is in the form of general revenue assistance other than GST revenue grants, is a key component of the financial support framework established under the Intergovernmental Agreement on Federal Financial Relations (IGA). The Act ensures that the Minister can make payments in a prescribed manner, and these determinations are legislative instruments that are registered on the Federal Register of Legislative Instruments. Importantly, these determinations are not subject to disallowance, allowing for flexibility in meeting the obligations under the IGA.
The Act imposes specific obligations on the Minister, requiring them to make payments of general purpose financial assistance in accordance with the IGA. This involves crediting amounts to the COAG Reform Fund, ensuring that the payments are used for the purposes agreed upon in the IGA. The Act also mandates that these determinations are subject to extensive consultation with the States, reflecting the collaborative nature of federal financial relations. Additionally, the Act clarifies that the Minister’s determinations, while legislative instruments, are not subject to disallowance, which is critical for meeting the commitment under the IGA.
Failure to comply with the provisions of the Act can lead to civil and criminal consequences. While the Act does not specify explicit offences or penalties, breaches of the obligations under the IGA could result in legal actions for non-compliance. The Minister’s determinations, being legislative instruments, must adhere to the requirements of the Legislative Instruments Act 2003, which includes provisions for review and potential legal challenges. Additionally, the ongoing consultation with the States ensures that any issues are addressed collaboratively before they escalate into formal legal disputes.